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2026.09.25 | TB | Insurance | Australian Motor Insurance Claims

原标题：Australian Motor Insurance – Claims Inflation, EV Underwriting & Smash Repair Negotiations

#financials

Third Bridge · 2026-09-25

Analyst-led • 26 Aug 2026

Companies: IAG AU, SUN AU, TSLA US

Silvio Necco (SN) Head, Assessing & Adjusting, Motor & Property at QBE Insurance Group Ltd

Anubhav Joshi (AJ) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

AJ [00:00:01]: Welcome to Third Bridge's Interview entitled Australian Motor Insurance – Claims Inflation, EV Underwriting & Smash Repair Negotiations. I'm Anubhav Joshi, and I will be facilitating today's Interview with Mr Silvio Necco, Head, Assessing and Adjusting Motor and Property at QBE Insurance Group.

Silvio, before we start today's Interview, please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

SN [00:00:39]: I agree.

AJ [00:00:41]: Could you begin with a brief 60-second introduction of your background?

SN [00:00:47]: My name is Silvio Necco. I'm the Head of Motor Assessing and Property Adjusting. I've been in the industry for 36 years. I've started off as a Motor Assessor. I've worked my way up through internal audit with a lot of experience predominantly in the motor assessing and motor supply chain space. I've also, over the past 6-8 years, also now looking after a major property portfolio with property adjusters.

Questions

[00:01:24] Which core trends and fundamentals are shaping the motor insurance market?

SN [00:01:32]: That's a good question. From my perspective, I believe that vehicle repairs are getting more expensive, and that's simply due to ADAS technology, the sensors, cameras and a lot of the EV components that are out there with a huge now influx of EV vehicles in the Australian market. I also believe the fundamental issue is that the skilled labour remains in short supply. Unfortunately, it's putting a lot of pressure on repair costs and actually repair cycle times. That's simply because they just can't find the qualified tradespeople who are actually able to facilitate these repairs. You overlay that with parts supply, although parts supply has improved compared to the COVID period. I must make it very clear that actually costs remain well above historical levels. I don't think we'll actually ever get to where they were pre-COVID. What that's having around the core trends around the market is that customers are keeping vehicles longer, and that's creating additional repair complexity.

Then you look at claims frequency in general, although it's quite stable, the severity continues to increase. I've seen it over years and years, and it's actually industry well known that it's been going up month by month [actually year on year]. Then to that, you add the extreme weather events that actually we have been experiencing here in Australia over the past few years. It's been fairly benign. We look at the hail that actually hits the Australian market in various areas of Australia, but particularly the actual east coast. That creates a lot more volatility across the market, which actually pushes up claims cost.

[00:03:47] Claims inflation has been consistently growing over the last five years in Australia. What is your outlook for the next three years? How would that break down by frequency and severity?

SN [00:04:08]: The claims inflation, although it's moderated from the peak levels that we've seen around that 2022, 2023, 2024, I think that it's actually unlikely to return to its old environment. It was sitting around that 3-4% inflationary rate around that '22, '23, '24 period. I actually expect inflation to remain elevated and probably to remain elevated in the high-single-digit range around that 7-9% mark. Again, that's to me driven, as I mentioned earlier, around vehicle technology, labour shortages and repair complexities.

AJ [00:04:59]: How long do you expect that high-single-digit range to continue growing?

SN [00:05:10]: If I had a crystal ball, I'd be worth a lot of money. I would say for the next 3-5 years… The reason why, if I could break it down by a frequency and severity. From a frequency perspective, I feel it's actually likely to remain broadly stable for the moment and potentially with a slight decline as vehicle safety systems continue to actually improve. Unfortunately, what the Australian market is seeing at the moment around severity, that's expected to remain elevated and grow faster than actually CPI, again, just due to increasing repair complexity, labour costs, but then you also throw hire car expenses on top because a lot of insurers today, if you can identify the actual at-fault driver, they give you a hire car for up to 14 days depending on which insurer, also up to 21 days. That all adds to the severity and actually claims inflation.

AJ [00:06:25]: Hire car costs increasing?

SN [00:06:35]: Yes, hire car costs increasing. Cost of fuel has been increasing with the crisis in the Middle East. Their expenses are going up. Hire car expense are going up for customers that have actually got a hire car benefit attached to their policy and/or if you're a customer with a major insurer in Australia who's had an accident and can identify the at-fault driver, the insurer gives you a free hire car up to 14 days and in some cases, up to 21.

AJ [00:07:12]: What happens if the repair time period is longer than that?

SN [00:07:18]: Generally, it's in agreement to the customer that it's a benefit to the policy, but they normally are very strict on between what the policy offering is. As I said, it's actually normally 14 days. There are some gold package products out there that offers it up to 21 days, but you pay for the additional premium. Insurers are sympathetic and they're fairly tight on whatever the policy response to. If there's an issue around parts delays that's caused by the supplier or not managed properly by the insurer, they may give an ex gratia by an extra couple of days, but they are very tight on not exceeding the policy limitations.

AJ [00:08:11]: You said that frequency might remain stable or even reduce, whereas…

SN [00:08:20]: Slightly, yes.

[00:08:23] Severity might be the main reason why the 7-9% claims inflation exists. Which particular costs are expected to accelerate or decelerate in 3-5 years? Could you share individual growth percentages in those claims inflation rates?

SN [00:08:53]: From an acceleration perspective, labour costs will definitely accelerate. ADAS calibrations and diagnostics, EV-related repair costs, hire car costs, and I'll also put in there credit hire and litigation-related costs, particularly in the Victorian market. Credit car hire and litigation is very high in the Victorian market. It's actually all over Australian market, but Victoria for some reason, has a higher percentage rate where they use credit hire companies and they do a lot of litigation, particularly a lot of smash repairers that aren't a preferred supplier to a particular insurer. That's when they'll engage credit hire and go litigation. That's what I believe the accelerated costs are from what… Did you say decelerate as well?

AJ [00:10:06]: Yes.

SN [00:10:07]: I think parts inflation compared to recent years will decelerate. I think as we get more supply chain moving in the country and more established OEMs, I think the parts inflation it should come down. Vehicle replacement costs will actually come down. The reason why I say vehicle replacement costs will come down is because cars are getting cheaper. If you compare what cars were worth 10 years ago compared to today, you get a lot more for a vehicle today than what you did for a car 10-15 years ago. Even you can buy cars now for AUD 22,000, and they come with all the bells and whistles that you would have had to pay for in recent years. I also think that towing and storage costs will actually come down, and that's only because of regulatory pressure that's currently being put on the industry by the regulators and state territory and government.

[00:11:28] Looking at the accelerated costs – labour costs, ADAS [advanced driver-assistance systems] calibration and diagnostics, EV repair costs and hire car costs – what are the key drivers for those costs going up or any bottlenecks preventing them from going down?

SN [00:11:48]: Labour costs is simply not enough qualified tradespeople, not enough qualified panel beaters, spray painters and EV technicians. The other one I mentioned was parts. Parts, it's better than COVID, but OEM supply chains are still inconsistent for some brands, particularly brands like Tesla, where they want to own the whole eco chain and they won't sell parts to a non-badged Tesla repairer. ADAS repairs, so more sensors means more calibrations, even the minor damage vehicles that have actually generated cosmetic damage on bumper bars, on windscreens, etc, will actually generate significant repair costs. You've got EV repairs, specialist equipment that's actually required to facilitate EV repairs. You've got battery assessment of these electric vehicles. Unfortunately, there's actually limited qualified repairers that are able to facilitate these repairs, which unfortunately will increase both cost and increase repair duration. Then with the repair duration being actually increased, that's going to also impact hire cars. You're going to have repair delays directly increase hire car durations and the overall claims cost.

[00:13:28] With the costs rising, what strategies – apart from growing the premium pricing – are insurers deploying to reduce or sustain current loss ratios in spite of the severe claims inflation?

SN [00:13:50]: What a lot of insurers are doing here in Australia, especially the larger insurers is they're expanding their preferred repairer networks. They're bringing more repairers on contracts and some of them making their strategic partners. It's actually well known in the industry. It's called preferred repairer network. They're actually expanding that. There are also greater use of their own insurer-owned or aligned repair facilities. There's two major players, there are two biggest players here in Australia have now embarked on opening up their own repair shops and staffing them directly. Faster triage and repair decision making, improved fraud detection and prevention, I think that's something that actually a lot of insurers in Australia have neglected over the years, but hoping that with actually AI technology that will help improve fraud detection and prevention.

The other one is better risk selection and portfolio segmentation. What I mean by that is they're able to better identify with actually a lot more clean data. They're better able to identify higher risk areas where there's more accidents, where there's more thefts occurring in different geographical areas throughout Australia in different states and territories, but also stronger supply performance and managing those supplies to really address and control some of those costs. Having a good, strong supply performance management framework in the back end that's able to look at the trends, look at the costs, but live. I'm not talking two or three months down the track. There's some good reporting available at the moment. With the aid of actually AI, that's making a lot easier to better manage supply performance and risk selection around which portfolios and segmentation do insurers want to go down to.

[00:16:23] Are any insurance providers significantly better at making the relationships or strategic partnerships with preferred repairers?

SN [00:16:40]: Yes. There is Suncorp and IAG.

AJ [00:16:46]: What is allowing them to do better on that front?

SN [00:16:54]: They're actually owning their own shops. They actually own the smash repair facilities, and they're buying up in areas where there's actually growth and where there's claims volume. They're not reliant on a third-party supplier to be part of their network. They're opening up their own shops. They're employing their own staff as in panel beaters and spray painters and mechanics, and they're carrying out those… They're able to get their customers' cars repaired and they're exclusive only to their brands.

[00:17:33] In the areas where Suncorp and IAG have picked up a bunch of smash repair facilities, how are other competitors able to get their customers' cars serviced, given there is a structural limitation on the number of repair facilities?

SN [00:18:01]: They're able to align themselves with actually other repairers and expanding their own preferred repairer networks. By not having too many, but having the right number in specific locations where there's historical trend volumes and by promising volume to those repairers on a weekly basis and faster payments. It's basically instant payments. What the industry is also doing is some of these other insurers that actually haven't got the ability to own their own shops is that they're promising volume to dedicated preferred repairer networks. They're able to pay them quicker, but they've also got what they're calling self-assessing capabilities, which means that they're allowing the repairer, if it meets a certain criteria, that once the assessment or the job is allocated to them, they're able to start that job immediately, once they've contacted the customer. They can book it in themselves between the time that's agreed with actually them and the customer, and they can carry out the repairs immediately without having to seek authorisation from the insurer.

It's cutting out a lot of the red tape for them to make their processes a lot smoother and easier. If you think about you're giving them more dedicated work, you're allowing them to start the repairs at their convenience. It doesn't need to be assessed because they are called self-assessing and you're able to pay them instantly within 24 hours of when the invoice is actually sent through. It keeps them viable and it keeps them close to some of those insurers that haven't got their own aligned repair facilities.

[00:20:10] Would there be a point where certain regions would only opt for a large insurer, such as Suncorp or IAG, because it has the best repair turnaround times?

SN [00:20:29]: To a certain extent, yes. From what I've seen in the industry is that customers chase price. A lot of predominantly, especially with the actual younger generation, they actually chase price. They're not committed to a particular brand or a particular insurer. They'll go to where they're able to get the best premium for their particular asset, because at the end of the day, all actually insurers offer the same customer service where they all warranty repairs for lifetime. They all align themselves with either a preferred repair network or they have their own. They're all offering new parts for at least up to the warranty period of the vehicle. From a customer perspective, whoever can offer the best price, that's where they tend to actually grow.

[00:21:43] We are observing an increased market competition, and there is expectation of claims inflation to rise. How do you expect premium pricing growth to trend over the next 3-5 years?

SN [00:22:00]: I think premiums definitely are still likely to increase, but the pace should slow down. The large corrective rate rises over the last few years, I believe, are largely behind us. Competition and affordability pressures will limit future increases because you can't keep putting your prices up. You've got to look at more efficiency in the way you do things, both internally and also externally, although ongoing claims inflation means meaningful premium reductions are likely.

[00:22:47] You mentioned that claims inflation was expected to grow at high-single digits, at 7-9%. How would it compare to premium or pricing growth over the next 3-5 years?

SN [00:23:25]: I think it will remain very stable. I won't put a percentage on it because I'm starting to see premiums come down because a lot of insurers pulled the lever too hard over the past couple of years. A lot of insurers in the industry lost a fair bit of customer base. Then you've got a lot of new start-ups and you've got a lot of other intermediaries coming in and actually opening up the same offering on motor insurance. I think premiums will actually remain stable because they can't keep increasing them because otherwise, it will become a point in time where insurance will become unaffordable here in Australia. I'm starting to see for the first time in the past few years is that premiums are actually coming down. I'm not saying they're coming down dramatically, but they're stabilising and there's a couple of percentage points, 5-10% cheaper. I know that myself, with actually my own family and looking at cars is that there are some cars that are cheaper to insure now than what they were 12-24 months ago. That just goes to show that insurers are easing up on the lever, and they're looking for more meaningful ways to be more efficient in what they do to keep the cost down for themselves.

[00:25:00] If prices remain stable, would you expect claims coverage, excess or other key policy terms to change in response to a more competitive or a softer market, and how?

SN [00:25:16]: More excess options, I believe, and higher standard excesses. That's another way of keeping your premium down. You choose a higher excess, you'll keep the actual premium down. Greater use of optional add-ons rather than automatically bundled benefits, I believe that's what a lot of insurers are doing at the moment. If you want to put add-ons, they're putting them down is actually optional rather than automatically bundling and then increasing what the cost of that vehicle is, which then reflects premium in actual price. I believe that those insurers will start tightening hire car benefits and limits. To your question earlier is that they're becoming a lot more tougher on hire car benefits and the limits. Rather than saying we'll give you a like-for-like vehicle, for instance, Tesla, they might give you a Chery. Rather than giving you a BMW, they might give you a Camry. Still safe, nice car, but it keeps the cost down. You still got a car to get you from point A to point B, but it may not be a like-for-like.

[00:26:45] How are combined ratios expected to trend over the next 3-5 years?

SN [00:26:56]: I think combined ratio should gradually improve as recent pricing increases earn through and operational improvements take effect. Margins are likely to remain relatively thin because claims inflation remains elevated.

[00:27:21] How do EVs and ICE [internal combustion engine] vehicles compare on average when it comes to the claim severity, repair duration and hire car costs?

SN [00:27:43]: If I compared ICE vehicles, those internal combustion engines vehicles, so EVs, I feel, generally have higher average repair costs, and that's widely known. They've got longer repair durations, higher hire car costs due to the longer repairs, as I just mentioned. There's greater calibration required on EVs and specialist labour requirements and specialist tooling. I feel that repair costs… The industry is looking depending on who you are and what your book is like and the actual mix between 25% and 35% higher to repair than comparable to ICE vehicles in many segments.

AJ [00:28:45]: That is all-in-all repair costs?

SN [00:28:49]: Yes, correct. Again, because of the higher cost on actually to repair an EV, the longer it takes to repair an EV, the hire car costs associated with that, the longer repair times, the more calibration required on those vehicles. The more specialist equipment, the more specialist labour, you've got to pay for that.

AJ [00:29:11]: Which of these costs could be singled out as the major reason behind that delta? Is it spread out across all of the reasons?

SN [00:29:26]: It's spread out across all 3-4 that I just mentioned.

AJ [00:29:33]: Do you expect that delta to change over the next 3-5 years? What would drive that change?

SN [00:29:42]: I feel that gap should narrow somewhat as repair capability improves and the EV volumes increase in Australia. However, EVs will likely continue to cost more to repair than the equivalent ICE vehicles, simply due to battery systems, technology and specialist repair requirements. Again, like everything, the more there are, the more exposure we have to them, the better people get at it and the better the supply chain improves. EVs will always for the foreseeable future, the next 3-5 years, cost slightly more to repair than your normal ICE vehicles because they've got batteries, they've got technology, specialist repairs requirements, specialist tooling, OEM requirements. You just can't change that. That's just a fact.

[00:31:04] Is there a difference in the frequency rate between EVs and ICE vehicles?

SN [00:31:12]: Yes. What we are measuring, so there's actually higher frequency in actually ICE vehicles compared to EV vehicles. Potentially because there's probably a lot less on the road than actually ICE vehicles, but frequency is high in the non-EV market compared to the EV market at this point in time.

AJ [00:31:39]: Could you help us quantify what that looks like on the ground?

SN [00:31:44]: I'll need to get back to you on that. Off the top of my head, I can't adequately answer that for you.

[00:31:53] To what extent are current EV underwriting considerations and pricing capturing the actual claims experience in Australia?

SN [00:32:05]: I know that the industry itself, that most insurers have adjusted pricing for EV risks because they've seen that as actually a risk and identified that early in the piece, but the market is still learning here in Australia. It's still very young. EV is still very young here. There's rapid changes in the vehicle mix. There's rapid changes in repair methods, in replacement costs, mean pricing sophistication will continue to evolve as the claims experience matures.

[00:33:14] Is there something that is misunderstood while underwriting EVs?

SN [00:33:41]: No, it's just data. It's just data. As I mentioned earlier, the market is still actually learning on actually EV vehicles. Unfortunately, there are so many EV new entrants coming in from China into Australia, it's making it very hard to really get a good grasp on what that means around what's that going to do to your book. There's actually a lot of work happening in the insurance industry around understanding EVs and understanding what that vehicle mix looks like and what the OEM repair methods are and how that matures in the market. It's probably a little bit too early, but it's actually not having enough meaningful data to be able to compare it. Just think back, ICE vehicles, we've had decades and decades of data. We've had a lot of manufacturers based here in Australia. All that's gone. It's all overseas entrants coming into the market. That's having a huge shift in how you price them, how you repair them and understanding what that means for your book.

AJ [00:35:05]: How much time would it take to be able to understand those EV underwriting dynamics accurately?

SN [00:35:17]: I think at least the next three years, but AI might change that. AI will be able to gather data a lot quicker and a lot more accurate than what the traditional methods have been. I'll probably say over the next 2-3 years, I think the Australian insurance industry should have a very good grasp and understanding on how EV impacts the market compared to ICE vehicles, including hybrids. We talk about EVs. I'm talking about hybrids here as well.

[00:35:51] Do you see the repair market adequately capturing requirements for EV repair facilities, parts and personnel? To what extent is progress being made on that front?

SN [00:36:07]: I believe that the industry is improving, but it's not fully there yet. Major metro markets are developing capability very quickly, but shortages remain in those qualified technicians, the specialist equipment and toolings that are required and not just for one particular make and model, it's for many makes and models. There's different tooling and different capabilities required for different sort of brands. Also accredited repair facilities, particularly in regional areas. Just to sum it up, I feel like the industry is improving, but we still got a fair bit to actually go. Major metro markets are developing capability very quickly in the metro areas because that's where we've got more people, but shortage remaining in the qualified technicians in the specialist equipment and accredited repair facilities because repairers need to train themselves up to become EV repairers. I think the bigger issue is around the regional remote areas of Australia.

[00:37:40] What role are insurance providers playing in navigating the structural shift towards higher EV and hybrid vehicle penetration and being ready to service those vehicles?

SN [00:37:56]: What insurers doing to help navigate that big structural shift towards high EVs is they're heavily investing in training their assessors and training their repair networks. They're looking at building EV capable supplier network. You'll have your smash repair network, but you're starting to see now that some repairers are specialising in EV capability only and others are doing ICE and some are doing both. Refining underwriting and pricing models with more data. The more data you have, the more as time goes by, the help of actually AI, they're better to help understand what that means for your book to make better underwriting decisions and just monitoring… This is a very important one that actually a lot of people take for granted. It's monitoring OEM-specific repair performance and supply chains. I think that plays a major part because, again, you take Tesla, Tesla owns the whole ecosystem. They sell you a Tesla, you got to go to a Tesla badged repair shop to get your Tesla serviced. You have to go to a Tesla-approved badged repairer to have your vehicle repaired.

If you're not a Tesla-badged repairer on their system, they will not sell you parts. They're trying to keep the whole eco chain to themselves. What that does is they're able to dictate prices. There's no competition because a non-badged Tesla repairer saying, "I can repair the vehicle, but I can't get the parts." Therefore, they're forcing you to go to Tesla. There are some other manufacturers now looking at that as well. They're owning the whole eco chain. Really important thing here is monitoring OEM specific on what they want to do.

[00:40:18] Do any OEMs, such as Tesla, stand out in being difficult to repair or being fairly simpler to find parts for or find personnel that can service them?

SN [00:40:36]: Parts, as I mentioned earlier, across all the EVs, all the manufacturers are readily available, except for MG. MG is widely known in the industry. The rest of them, from what I understand and from what I see and read and talk to industry peers is that the supply chain isn't where the ICE vehicles are for EVs, but it's not far behind it. They've actually done fairly well. There's not much difference, except if it's an MG. In fact, there are some hire car companies and there are some larger corporations that refuse to purchase MGs in their fleet because of that known issue.

[00:41:58] How constrained is smash repair's capacity across Australia? Could you break down the capacity in the market by corporate groups, such as AMA Group, vs insurance-owned vs independent providers?

SN [00:42:17]: I'll do the best that I can. From my perspective, repair capacity remains constrained across much of Australia, particularly in regional areas. I've got to emphasise that. Regional areas are at the crossroads at the moment where there are a number of shops, where your mom-and-dad shops are closing down because they simply cannot find tradespeople. A lot of regional repairers are refusing to be part of an insurance network simply because they've got so much work they don't need the actual additional work. At a high level, AMA remains the largest corporate repair group. That's now followed closely by Drive Group [Australia] who operate here in Australia, who are the original founders of AMA, who sold out and opened up and basically are cloning what they did with actually AMA. That's Drive Group solutions. Insurer-owned or aligned repair operations continue to grow, as I mentioned, particularly at IAG and Suncorp. Independents, so that's your smaller mom-and-dad shops still make up a large proportion of the total repair capacity, especially outside metro markets. The biggest constraint remains to be skilled labour regardless of where you are, but more so in regional remote areas.

[00:44:04] Are any of the corporate repair or insurance-owned groups able to mitigate the impact we're discussing better than others, either through training or having better policies in terms of retaining or hiring talent?

SN [00:44:30]: What they're doing is they tend to specialise in certain mix of vehicles and certain types of vehicles, and they're actually aligning themselves with Thatcham's, which is an industry-known training organisation to get actually accreditation. They're also very heavily involved in the… I'm trying to think of the other big training organisation here in Australia that a lot of insurers and repairers go to, to keep their skillsets up. Yes, training is the actual biggest one and providing good facilities for their staff and making it a good place to be at like a clean environment, latest technology, latest tooling, that actually helps out, where people want to stay rather than working on a dirty floor, don't know what type of jobs coming in, where it's an old car vs a more new vehicle. People like to work on more cleaner cars.

[00:45:52] How effectively can acquiring a repair provider drive expenses down for an insurance player?

SN [00:46:03]: Priority access to capacity, greater control over repair quality and cycle times and improved cost transparency. Acquisitions can improve expense control, no doubt. They are not the complete solution simply because there's labour shortages that remain industry-wide. Even with your AMAs, even with your Drive Group solutions, even with IAG, even with Suncorp, they bring in labour from other parts of the world to fill in the actual gap. They are sponsoring on visas.

AJ [00:46:54]: If I'm an insurance provider and I choose to work with AMA or Drive Group vs acquiring and working with my internal repair team, what would be the delta in cost saving?

SN [00:47:11]: What would the downtime cost saving be?

AJ [00:47:14]: The delta or difference in costs.

SN [00:47:20]: There's significant cost savings if you align yourself with an actual larger corporation like AMA or Drive Group solutions because what you're doing is that you're giving them workflow, you're giving them capacity. You're giving them guaranteed work. Therefore, they're able to keep their costs down, and that relates to… As I mentioned earlier, if the industry gives them more work and they've got controlled work over a long period of time, and they're not having to advertise, not having to own tow trucks to go chase work, they're not having to pay other tow operators to bring work into them because the work is at their front door and it's clean work and they've got their own ability to self-assess and they get paid within 24 hours after submitting, they keep the actual cost down over a non-vertically operated shop because they still need to advertise their staff, they actually come and go. I also want to say that it's also industry known that your AMA Group pays significantly higher for skilled labour than what a non-consolidator does. People want to go there, but they're able to keep their cost down because they're getting volume.

[00:49:18] Which insurers are insulated from the structural undersupply of repair personnel, either through acquisitions or strong commercial relationships with third-party providers and corporate groups? You mentioned IAG and Suncorp, but are there any other players that have mitigated the impact?

SN [00:49:46]: Yes, insurers with strong managed repair networks, so insurers that have got a good managed repair network behind them. Long-term strategic supplier relationships and ownership interest in repair capacity, those insurers are better positioned. However, I make it very clear again, no insurer is completely insulated from workforce shortages across the industry. Insurers that have got some form of long-term strategic supplier relationship, that have got a good, strong managed network behind them that's able to give them capacity and work are a lot more insulated, but they're not completely insulated, not even your AMAs and not even your Drive Groups, not even your IAG-owned shops or Suncorp-owned shops because there is a shortage of labour, of trade in the industry across the board from apprentices right through. It's an old ageing industry.

[00:51:14] What advantages or disadvantages would personnel have working with a corporate group such as AMA or Drive vs an insurance-owned repair shop vs an independent repair shop?

SN [00:51:40]: Consolidation has generally shifted some negotiating power towards larger repair groups. There's no doubt, but insurers still have significant leverage through claims volumes. Remember, insurers own the customer, but fewer large repair groups can reduce flexibility in some regions and increase dependency on key suppliers.

[00:52:17] How do you expect smash repair fixed and variable fee structures to evolve over the next 2-3 years, given the current market conditions?

SN [00:52:29]: Pretty straightforward, and I'll call out. Labour rates are likely to continue to actually increase, especially when you got people like AMA pinching from other… They're basically cannibalising the actual industry. Labour rates are likely to continue to actually increase. Overall repair costs will just keep increasing, but likely at a slower rate that we've seen over the last few years, but they'll still be actually increasing.

[00:53:08] Do you see any changes in fixed and variable fee structures across entities? Do you see the market progressing towards a variable fee structure? I'm assuming most of it has been fixed.

SN [00:53:28]: A lot of it has been fixed. I think it will remain where it is today. That's the way the industry has been operating for actually a number of years. There are some fixed cost repairs with certain insurers, with their suppliers, but they're starting to come off that. They're just going back to what we used to do, what the industry has been known to do for decades. If the question is, how do you expect smash repair fixed and variable fee structures to evolve over the next 2-3 years? There's all fixed times. Every insurer has got its own fixed actually rates and fixed times. Every vehicle, particularly your larger insurers like IAG and Suncorp and others, they all got fixed rates and fixed allowances, and they don't deviate from that. Industry is fairly insulated. The insurers are fairly insulated around repair costs when it comes to repair times.

[00:54:53] Do you expect more consolidation in the smash repair market? Who would be doing that? Are they the corporate or insurance-led groups?

SN [00:55:03]: I think insurance-led. It's a combination of both. Your AMAs were the actual pioneers, but then you had MotorOne Group have come up there. Now you've got Drive Group solutions. There will be a lot more consolidators within the industry. I think your main suppliers like AMA and Drive Group solutions are buying out a lot of your mom-and-dad shops at the moment. While that's happening and they're buying a lot of that capacity, your larger insurers that have got massive volume, so the larger insurers like your IAG and your Suncorps will continue to evolve and have a much larger footprint. Now I know that reading that IAG are also looking at opening repair shops in regional towns within Australia because there's simply no capacity in those towns. They're actually buying mom-and-dad shops out, offering them good money to sell and then they actually take over. Then they keep the same staff, they improve the premises and then they look for skilled overseas labour to actually boost their staffing levels up.

[00:56:42] With corporate groups looking at M&A and the larger insurers picking up mom-and-pop shops, where does that leave other insurance groups in terms of bargaining power or the ability to drive the impact of claims inflation down?

SN [00:57:04]: That's a great question, is to align yourself with what's left out there like your AMA groups, like your Drive Group solutions and your larger mom-and-dad shops. It's got to align yourself with a good repair network behind you, approved repair network behind you. Anyway, you got to survive. If you haven't got a good repair network behind you, you're going to fall behind. You're not going to have your customers cars fixed. You've got to align yourself with more repairers on contracts and making life easier for them in the repair process in payment and volume. You need more strategic partners.

[00:58:04] What medium-term headwinds or tailwinds are you observing in the motor repair and the motor insurance market?

SN [00:58:15]: Headwinds, again, I know I keep saying it, ongoing labour shortages, increasing vehicle technology and complexity, growth in EV and hybrid vehicles, continued pressure on repair cycle times, cat events. Cat events placing stress on repair supply chains. As I mentioned earlier, credit hire and litigation cost inflation. The tailwinds is part supply chains continuing to improve, greater use of AI, automation and digital assessments, improved repair network management, as we just spoke about. As I mentioned earlier, better fraud detection capability and continued safety improvements helping keep claims frequency relatively stable. What I'm basically saying is, overall, the market is moving from a supply chain crisis to a capability challenge. Repairs are becoming more complex and insurers that can secure capacity, improve efficiency and manage severity will be best placed over the next few years. Whoever can do it better, we will be able to offer better premiums and hopefully attract a better customer base.

AJ [00:59:56]: We will now end the Interview. Let me close by saying thank you for your input.

SN [01:00:03]: I appreciate the time and the opportunity. Thank you so much. They're very, very good questions.

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